Go to a specific date

Explore

The Public Inspection page
on FederalRegister.gov
offers a preview of documents scheduled to appear in the next day's
Federal Register issue. The Public Inspection page may also
include documents scheduled for later issues, at the request
of the issuing agency.

The Daily Journal of the United States Government

Legal Status

Legal Status

Notice

Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Order Granting Accelerated Approval to Proposed Rule Change, as Amended, Relating to Exchange to Exchange Billing Under the Linkage Plan

Document Details

Enhanced Content - Table of Contents

This tables of contents is a navigational tool, processed from the
headings within the legal text of Federal Register documents.
This repetition of headings to form internal navigation links
has no substantive legal effect.

Enhanced Content - Sharing

Enhanced Content - Document Print View

Enhanced Content - Document Print View

Enhanced Content - Document Tools

These tools are designed to help you understand the official document
better and aid in comparing the online edition to the print edition.

These markup elements allow the user to see how the document follows the
Document Drafting Handbook
that agencies use to create their documents. These can be useful
for better understanding how a document is structured but
are not part of the published document itself.

Enhanced Content - Developer Tools

Official Content

Official Content

Published Document

This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format.

Start Preamble
September 21, 2006.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) [1]
and Rule 19b-4 thereunder,[2]
notice is hereby given that on August 25, 2006, the New York Stock Exchange LLC (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. On September 7, 2006, the Exchange filed Amendment No. 1 to the proposed rule change.[3]
The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons, and is approving the proposal, as amended, on an accelerated basis.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Exchange proposes to permit the Exchange to bill directly, and to accept direct billing from, other participants in the proposed “Plan for the Purpose of Creating and Operating an Intermarket Communications Linkage Pursuant to Section 11A(a)(3)(B) of the Securities Exchange Act of 1934” (“Linkage Plan”) that are unable to implement Sponsoring Member billing, as described herein, on October 1, 2006.

In its filing with the Commission, the NYSE included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item III below. The NYSE has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.[4]

1. Purpose

On July 17, 2006, the American Stock Exchange LLC, the Boston Stock Exchange, Inc., the Chicago Board Options Exchange, Incorporated, the Chicago Stock Exchange, Inc., The NASDAQ Stock Market LLC, the National Stock Exchange, the New York Stock Exchange LLC, and the NYSE Arca, Inc., executed and filed with the Commission the Linkage Plan. The Philadelphia Stock Exchange, Inc. (“Phlx”) subsequently executed the Linkage Plan on August 1, 2006.[5]
The Linkage Plan was filed with the Commission pursuant to Rule 608 of Regulation NMS under the Act.[6]
The purpose of the proposed Linkage Plan is to enable the Linkage Plan participants to act jointly in planning, developing, operating and regulating the NMS Linkage System (“Linkage”) that will electronically link the Linkage Plan Participant Markets to one another, as described in the Linkage Plan. The Linkage Plan participants have requested that the Commission approve the Linkage Plan by October 1, 2006. The Plan would run concurrently with the ITS Plan from October 1, 2006 until February 5, 2007.[7]
The Linkage Plan by its terms ends on June 30, 2007; Start Printed Page 57597however, if the Linkage Plan participants wish to extend the term they could agree to do so, subject to Commission approval.[8]

The Linkage Plan provides that orders must be sent to a Participant Market through the auspices of a member of that Participant Market (“Sponsoring Member”). An order entered through the Linkage must specify the member of the destination market (either clearing member or default Sponsoring Member). Pursuant to the Linkage Plan, each market should maintain within the facilities of the Securities Industry Automation Corporation (“SIAC”), the facilities manager for the Linkage, a database of default Sponsoring Members for after-hours processing and billing for orders sent to a market where the originating firm is not a member of the market to which the order is sent for execution.

Historically, ITS Plan Participants have not imposed transaction charges for executions of commitments delivered through ITS, although the ITS Plan does not prohibit such charges. Under the Linkage Plan, each participant would be accessed through its own members and could charge for orders executed in its market through the Linkage. The destination market would bill the clearing or Sponsoring Member for executions in that market, pursuant to that market's transaction fee schedule,[9]
based on the monthly reports provided by SIAC.[10]
Certain markets, however, may be unable to supply clearing or Sponsoring Member information on orders routed through the Linkage to other markets by October 1, 2006. In this case, the Linkage Plan participants have agreed to bill each other directly, based on data supplied by SIAC.[11]

Example: A member of a self-regulatory organization (“SRO”) A that is not a member of SRO B sends an order through the Linkage to SRO B for execution. In routing the transaction through the Linkage, SRO A is unable to include Sponsoring Member information on the report. The transaction will be included in a monthly report provided to SRO B by SIAC (without identifying Sponsoring Member information), and SRO B may bill SRO A directly for the transaction in accordance with SRO B's transaction fee schedule applicable to the Linkage.

2. Statutory Basis

The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,[12]
in general, and furthers the objectives of Section 6(b)(5) of the Act,[13]
in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in, securities, to remove impediments to, and perfect the mechanism of, a free and open market and a national market system, and in general, to protect investors and the public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange believes that the proposed rule change will impose no burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others

The Exchange has neither solicited nor received comments on this proposal.

III. Solicitation of Comments

Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods:

Paper Comments

All submissions should refer to File Number SR-NYSE-2006-72. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/​rules/​sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal offices of NYSE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2006-72 and should be submitted on or before October 20, 2006.

IV. Commission's Findings and Order Granting Accelerated Approval of a Proposed Rule Change

After careful consideration, the Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder, applicable to a national securities exchange.[14]
In particular, the Commission finds that the proposal, as amended, is consistent with the Start Printed Page 57598provisions of Section 6(b)(5),[15]
in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in, securities, to remove impediments to, and perfect the mechanism of, a free and open market and a national market system, and in general, to protect investors and the public interest.

The Linkage Plan, the purpose of which is to enable its participants to act jointly in planning, developing, operating and regulating the NMS Linkage System electronically linking the Linkage Plan Participant Markets to one another, is expected to become operative on October 1, 2006. The Linkage Plan provides for a mechanism for charging for orders executed in each Participant Market using the information about a clearing or Sponsoring Member. Certain markets have indicated that they may be unable to supply clearing or Sponsoring Member information on orders routed through the Linkage to other markets, thus under the proposed rule change, which the Commission understands will be adopted by each of the Linkage Plan participants, the participants have agreed to bill each other directly, based on data supplied by SIAC.

The Exchange has requested that the Commission approve the proposed rule change, as amended, on an accelerated basis. The Exchange notes that the Linkage Plan participants expect the Linkage Plan to become operative on October 1, 2006, and that accelerated approval would permit the Exchange to implement exchange to exchange billing procedures at the start of the Linkage Plan's operation, allowing Linkage Plan participants who do not have a Sponsoring Member at each destination market, to use the Linkage Plan and pay fees directly to the other Linkage Plan participant.[16]

The Commission finds good cause, pursuant to Section 19(b)(2) of the Act,[17]
for approving the proposed rule change, as amended, prior to the thirtieth day after the date of publication of notice in the Federal Register. Granting accelerated approval would permit the Exchange to implement exchange to exchange billing procedures at the start of the Linkage Plan's operation enabling Linkage Plan participants who were not able to find a Sponsoring Member at each of the destination markets, to use the Linkage Plan and pay fees directly to another Linkage Plan participant.

Accordingly, the Commission finds that there is good cause, consistent with Section 19(b)(2) of the Act,[18]
to approve the proposed rule change, as amended, on an accelerated basis.

V. Conclusion

It is therefore ordered, pursuant to Section 19(b)(2) of the Act,[19]
that the proposed rule change, as amended, (SR-NYSE-2006-72) is hereby approved on an accelerated basis.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[20]

J. Lynn Taylor,

Assistant Secretary.

End SignatureEnd Preamble

Footnotes

4.
The staff has made minor changes to the Exchange's summaries pursuant to the telephone conversation between Karen Lorentz, Managing Director, Competitive Analysis, NYSE, and Nataliya Cowen, Special Counsel, Division of Market Regulation, Commission, on September 15, 2006.

7.
The Linkage Plan participants have requested that the Commission grant appropriate exemptions from the ITS Plan to accommodate this result. See letter to Nancy Morris, Secretary, Commission, from Robert Hill, Chairman, ITS Operating Committee, dated September 18, 2006.

10.
Under the Linkage Plan, the member of the destination market would be identified by a unique clearing number. If the clearing number provided by the originating Participant Market does not identify a member of the destination market, SIAC will identify the default Sponsoring Member of the originating market at the destination market for the security in question and that Sponsoring Member's identification information will be included on the order to the destination market on all reports sent to the destination market, including any report for billing purposes. The member identified on the order will be responsible for any fees in the destination market. SIAC will provide to Participants a key to match the clearing number to the member's name.

11.
The National Association of Securities Dealers, Inc. (“NASD”) is not a member of the Linkage Plan. In lieu of direct billing to or by the NASD, Linkage Plan participants expect to bill Alternative Display Facility (“ADF”) market participants directly and would be directly billed by ADF market participants, based upon data supplied by SIAC.

16.
The Commission understands that each of the Linkage Plan participants will file a proposed rule change similar to this one. To date, the Amex and the Phlx have done so. See file nos. SR-Amex-2006-85 and SR-Phlx-2006-58.